Technical Observations for the $XLE/$SPY Ratio

Among the evidence that gives me some conviction that the inflation trade is ending is this chart. I will point out several of its features.

  1. The inverse measured move has been met. It’s greedy to simply expect more without another structure to support it.
  2. The advance from the late 2020 low to the early 2021 high is a clear 3-wave pattern ( the blue “a”).
  3. And from blue “b”, “c” should be an impulse, and it is, as there are 5, non-overlapping waves in that move (the orange count).
  4. The relationship between the length of “c” and “a” is extreme, at 2:1. This would be a terrific place for it to turn.
  5. The bearish divergence on the RSI is what we would expect to see between the high of a “3” and a “5.” in this case those internal to “c.” This suggests the move is more likely to end soon rather than continue.

All of these technicals support a reversion, or even at a minimum, a consolidation or pullback of some kind if not a complete trend reversal.

XLE/SPY


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


2 thoughts on “Technical Observations for the $XLE/$SPY Ratio”

Leave a Reply

Your email address will not be published. Required fields are marked *